Future audit reports from PwC will now include the wording: ‘We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or in whose hands it may come save where expressly agreed by our prior consent in writing’. A clarification, says the firm.
But the timing, to say the least, was unfortunate. Just when the likes of the ICAEW and the Auditing Practices Board are doing all they can to restore faith in the audit, along comes PwC and undermines it.
Some of the commentary about the decision was scathing. ‘The craven behaviour of the accounting profession seems to know no bounds,’ wrote The Observer.
‘PwC, one of the “big four” left after the Andersen debacle, has done the exact opposite by issuing a disclaimer which in effect means that nobody – other than the specifically addressed recipients within the company – should put any faith whatsoever in their opinion. What is the point of having PwC as your accountant at all? Please tell me.’ Ouch.
But PwC’s position is the implied position of the government too. Indeed the report from the DTI’s company law steering group in July offered accountancy firms the escape clause they needed to justify limiting their potential liability.
As the steering group pointed out: ‘It is widely recognised that auditors’ so-called “deep pockets” have ensured that, of the possible targets of professional negligence claims for financial loss caused by misstatement in accounts, they are the favourites.’
And the government, while not yet embracing change, hinted it would be forthcoming. ‘The review also addressed the difficult question of auditor liability,’ it wrote in response. ‘It is possible, as work is taken forward by appropriate regulators to review the effectiveness of audit and audit regulation post Enron, that the government will conclude that further changes to company law in this area are desirable.’
Much has been written – deservedly – in praise of ministers of avoiding a knee-jerk reaction to the collapse of Enron. But on the issue of auditor regulation if the government had acted quicker, PwC might not have been forced to go it alone. And had that happened, PwC might not have faced the wrath of other firms and regulators annoyed that the biggest player has forced the hand of everybody else and invited a critical eye to be cast again over the accountancy industry.
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